Pricing is a controversial topic. The current trends tie your pricing to your self-confidence, touting the importance of knowing your worth when you set your prices.
In this article, I will show you how to set a pricing strategy that ties to the results you need as a business owner, not to your self-worth. Your pricing strategy should be just that, a strategy based on a set of criteria that gets you where you want to go.
Here are four criteria to help you set and determine your pricing strategy.
Criteria 1: What is your why?
Ask yourself these questions:
- How many people do you want to impact?
- Do you offer affordable solutions to meet that impact?
The more people you want to impact, the more lower-cost solutions you need available to help a large number of people in meaningful ways. If you are looking to niche down and be an expert with a small group of people, you can (and should) think about premium pricing as a strategy.
As an example, you could have tiered offerings that build on one another:
- Online content – no cost
- Online course for DIYers – one-time fee
- Ad-hoc services – pick and choose based on budget
- Projects – one-time costs with higher costs required
- Subscriptions and Retainers – in it for the long haul, whether it’s monthly or annually
Criteria 2: What can your customers bear?
Your customers will have an idea of what they can spend. Do you know what they can bear?
If your customers cannot afford your $3,000 solution and you do not have any other options to help them, are you losing out on a potential long-term customer by not offering other lower-cost solutions?
Criteria 3: What you need to cover your costs and still have profit.
- Cost of goods sold – the product
- Personal Labor –you, micro-business owner, are not free
- Operating expenses – day-to-day expenses
- Profit margins – do you have profit on top of all the above
Step back, look, and determine, are you going to make money?
If the answer is no, increase the price or reduce scope to ensure you can continue to deliver and still make a profit.
Criteria 4: Where is your competition charging?
This last one is a benchmark; the first three guide your pricing strategy; the fourth is your baseline to reinforce your pricing strategy.
For example, if you have a consulting practice, what are the large firms vs. boutique firms charging?
It’s important to understand where you are relative to the market because it gives you a baseline to anticipate how you will be perceived by customers when evaluating the cost.
When you consider your competition, don’t look in the traditional places. Think about competition in two ways:
- Alternatives your potential customers can use to solve the problem they have (the alternatives may look very different than your solution)
- Comparables customers will think of when they are deciding whether or not to move forward with you (again, it may not be your direct competition)
If you want a practical way to explore this, check out our post on how to triage your offer using our Go-to-Market Lean Canvas (adapted from the giants of course!)
If you connect your pricing strategy to your Why, What, Who, and Where you’ll set a pricing strategy that gets you results. Because you are worth so much as a person, but that worth doesn’t help you establish a meaningful price.
If this post helped you set pricing sign up for the waitlist for our upcoming microcourse on the subject.